May 4, 2010

Short Sellers And The Forclosed Catch A Break

Good news for people who lost their home because of financial problems, or did a short sale to avoid foreclosure. Typically, Fannie requires a five year wait period before owners can re qualify. Now you may not have to wait the typical four or five years to re-qualify for financing for another home, it could be as little as two years. Fannie Mae is relaxing rules that prevented loan applicants who did a short sales or a deed in lieu of foreclosure from obtaining a new mortgage for up to five years.

To qualify in the relaxed, minimum two years period borrowers will need to come up with down payments of at least 20 percent. If 10 percent is all you got the wait to qualify after losing your home reverts to the four year minimum.

But Theres a Catch

Borrowers can demonstrate that their mortgage problems were directly related to circumstances having to do with the excesses of this great recession...such as job loss, medical expenses or a divorce. It might might be able to qualify for new loans with minimum down payments of 10 percent in just two years. We will need to see how this plays out after the new rules take effect July 1.

For those of us who lost houses to foreclosure because of  financial mismanagement or speculation, the mandatory five year waiting period  stands. To qualify for a new mortgage, Fannie expects borrowers to reestablish credit sufficiently enough to pass the companys automated underwriting system.

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